Current state of farming/ag

[habitat]

I thought that only happened to me,I always joked I must control the price of grain because everytime I sold it went up. We started contracting part of grain usually so you get alittle better price sometimes

 

[bluedog69]

Ive never understood it. Some farmers run old equipment, vehicles, have old houses in bad shape etc. They seem broke. Then others are constantly driving the newest equipment, getting a new pickup every couple of years, nice houses, sxs's, going on vacations etc.

Most “well off” farmers have close to max debt. The “ poor guy “ is trying to get out of debt. I know an average sized farmer who borrowed $4.5 million to plant soybeans back in 2012.
The entire farm community is a huge house of cards for most people. The only thing keeping it going is government subsidies. The other thing that started the land prices skyrocket was the internet. People on the east and west coast figured out how poor and cheap we were in the Midwest. So they started investing in cheap ground which put a lot more buyers in the market.
Crazy the amount of ground that is owned by an LLC from many states away.

 

[deerdown]

Most “well off” farmers have close to max debt. The “ poor guy “ is trying to get out of debt. I know an average sized farmer who borrowed $4.5 million to plant soybeans back in 2012.
The entire farm community is a huge house of cards for most people. The only thing keeping it going is government subsidies. The other thing that started the land prices skyrocket was the internet. People on the east and west coast figured out how poor and cheap we were in the Midwest. So they started investing in cheap ground which put a lot more buyers in the market.
Crazy the amount of ground that is owned by an LLC from many states away.

What's average size?

In NW Mo, I'd guess average size would be 5000a? ....That would be $900/a to plant beans....... in 2012....

I know of some farmers in NW Mo cut back on acres last year and this year, while some are still looking to buy ground... had a big land owner/operator ask me last week if I wanted to sell a farm...

It's a K shaped economy in farming too it seems.

 

[Muskrat24]

Most “well off” farmers have close to max debt. The “ poor guy “ is trying to get out of debt. I know an average sized farmer who borrowed $4.5 million to plant soybeans back in 2012.
The entire farm community is a huge house of cards for most people. The only thing keeping it going is government subsidies. The other thing that started the land prices skyrocket was the internet. People on the east and west coast figured out how poor and cheap we were in the Midwest. So they started investing in cheap ground which put a lot more buyers in the market.
Crazy the amount of ground that is owned by an LLC from many states away.

I can tell you that I look at a lot of farm financials and they are hardly just getting by. As I mentioned the row crop sector made 100% plus return on investment in 2020-2023. Then a lot of producers spent like spoiled kids to avoid taxes and bid up cash rents, land prices and equipment prices and now are in a cash crunch. What do wage earners do when they earn income. They pay taxes. Farmers blow through their cash so they don’t have to pay taxes. Most of the time the asset is depreciable and moved down the balance sheet and the average farmer net worth is well into the top 25% of us net worths. The cattle sector prior to the past two years was hardly profitable except for packers. I don’t work with rice or cotton operations but some of my counterparts say that lower prices and drought affected yields the past two years have put those enterprises in trouble in areas. The beginning farmers with higher term debts are the most vulnerable.

 

[Muskrat24]

What's average size?

In NW Mo, I'd guess average size would be 5000a? ....That would be $900/a to plant beans....... in 2012....

I know of some farmers in NW Mo cut back on acres last year and this year, while some are still looking to buy ground... had a big land owner/operator ask me last week if I wanted to sell a farm...

It's a K shaped economy in farming too it seems.

Yeah that would have been a top 10% producer in 2012 to have that size of operating needs and soybean inputs in 2012 were not $900/ac unless way out of line cash rents. 5000 acres in NW MO is well above average. There are still a lot of under 1000 acre producers.

 

[Daver]

I can tell you that I look at a lot of farm financials and they are hardly just getting by. As I mentioned the row crop sector made 100% plus return on investment in 2020-2023. Then a lot of producers spent like spoiled kids to avoid taxes and bid up cash rents, land prices and equipment prices and now are in a cash crunch. What do wage earners do when they earn income. They pay taxes. Farmers blow through their cash so they don’t have to pay taxes. Most of the time the asset is depreciable and moved down the balance sheet and the average farmer net worth is well into the top 25% of us net worths. The cattle sector prior to the past two years was hardly profitable except for packers. I don’t work with rice or cotton operations but some of my counterparts say that lower prices and drought affected yields the past two years have put those enterprises in trouble in areas. The beginning farmers with higher term debts are the most vulnerable.

Background - While I do own two farms, that is not really my profession, I own a contracting business. Farming is cyclical, yes...and so is contracting...big time. I know multiple farmers that fit the bill of avoiding taxes no matter how much they have to spend to do it, as referenced above. Then, when things tighten up they have lots of expensive assets out in the new machine shed and not so much cash. Huh? I wonder why that is...but then I look at their brand new 78 row corn picker, their brand new 112 row planter which is pulled by their brand new 4000HP tractor...and then I know.

I know contractors who spend like a drunken sailor in the good years and then are sucking wind in the lean years...AND they have experienced this cycle before. One would think that they would have learned to save a little for a rainy day...but not so much. When I see all of the big, new equipment and know what they have paid for land...I am not too sympathetic to those farmers when things cool. I don't wish them ill...I just don't have the same sympathy that I do towards those that are in hardship when they did little to nothing to bring it on themselves.

 

[deerdown]

Background - While I do own two farms, that is not really my profession, I own a contracting business. Farming is cyclical, yes...and so is contracting...big time. I know multiple farmers that fit the bill of avoiding taxes no matter how much they have to spend to do it, as referenced above. Then, when things tighten up they have lots of expensive assets out in the new machine shed and not so much cash. Huh? I wonder why that is...but then I look at their brand new 78 row corn picker, their brand new 112 row planter which is pulled by their brand new 4000HP tractor...and then I know.

I know contractors who spend like a drunken sailor in the good years and then are sucking wind in the lean years...AND they have experienced this cycle before. One would think that they would have learned to save a little for a rainy day...but not so much. When I see all of the big, new equipment and know what they have paid for land...I am not too sympathetic to those farmers when things cool. I don't wish them ill...I just don't have the same sympathy that I do towards those that are in hardship when they did little to nothing to bring it on themselves.

It can be a fine line. No one likes to pay taxes, but to spend 100K to save 30k in taxes, you still have to make payments on 100K. Now, there are other factors to consider I'm sure, such as staying unter the $900K AGI for some farm programs/subsidies/etc.

As the saying goes, The Good Times don't last forever, especially in farming.....

 

[Muskrat24]

It can be a fine line. No one likes to pay taxes, but to spend 100K to save 30k in taxes, you still have to make payments on 100K. Now, there are other factors to consider I'm sure, such as staying unter the $900K AGI for some farm programs/subsidies/etc.

As the saying goes, The Good Times don't last forever, especially in farming.....

$900k is below the net income of the schedule F so that would mean the net farm income have to be $900k plus to not qualify. And if a farmer is at that level several also have wives that have a payment limit so then we are talking $1.8 mil for payment limits on most programs. Very low percentage are running into payment limit issues because that number for farming alone has to be net.

 

[MN Slick]

What's average size?

In NW Mo, I'd guess average size would be 5000a? ....That would be $900/a to plant beans....... in 2012....

I know of some farmers in NW Mo cut back on acres last year and this year, while some are still looking to buy ground... had a big land owner/operator ask me last week if I wanted to sell a farm...

It's a K shaped economy in farming too it seems.

Is he anywhere close to Mercer, MO?

 

[deerdown]

Is he anywhere close to Mercer, MO?

No, further west.